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Economic Perspectives on Software Design: PC Operating Systems and Platforms

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  • Steven J. Davis
  • Jack MacCrisken
  • Kevin M. Murphy

Abstract

Improvements in the software that provides hardware management, user interface and platform functions have played a central role in the growth and transformation of the personal computer (PC) industry. Several forces shape the design of these 'operating system' products and propel their evolution over time, including: A. The need to efficiently manage the interacting components of PC systems so as to keep pace with rapid advances in computer technologies the development of applications software. B. The need to maintain compatibility with existing applications while preserving the flexibility to incorporate additional functions that support new applications. C. The desire to economize on customer support costs and assign clear responsibility for making the interacting components of the PC work together. D. The desire to bundle multiple software features into a single package so as to more effectively meet the demand for complementary applications or reduce the diversity in product valuations among consumers. We analyze these forces and the factors that determine whether and when new features and functions are included in commercial operating system products. We also explain how this integration and bundling spurs growth in the PC industry and fosters innovation.

Suggested Citation

  • Steven J. Davis & Jack MacCrisken & Kevin M. Murphy, 2001. "Economic Perspectives on Software Design: PC Operating Systems and Platforms," NBER Working Papers 8411, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8411
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    References listed on IDEAS

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    Cited by:

    1. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2004. "Entry, Pricing, and Product Design in an Initially Monopolized Market," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 188-225, February.
    2. David S. Evans & Andrei Hagiu & Richard Schmalensee, 2005. "A Survey of the Economic Role of Software Platforms in Computer-based Industries," CESifo Economic Studies, CESifo Group, vol. 51(2-3), pages 189-224.
    3. van Wegberg, Marc, 2004. "Compatibility choice by multi-market firms," Information Economics and Policy, Elsevier, vol. 16(2), pages 235-254, June.
    4. Riyanto, Yohanes E. & Schwienbacher, Armin, 2006. "The strategic use of corporate venture financing for securing demand," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2809-2833, October.
    5. Kevin Boudreau, 2005. "The Boundaries of the Platform: Vertical Integration and Economic Incentives in Mobile Computing," Working Papers hal-00597767, HAL.

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    More about this item

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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